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Payment behavior describes the way a company pays its invoices in relation to agreed payment terms. It provides insight into the degree of payment discipline and consistency. It looks at payment terms, overruns, frequency of arrears and any payment arrangements. Payment behavior is often analyzed historically to identify trends. Structurally late payments can indicate liquidity problems or operational inefficiencies.
Within credit management, payment behavior is an important indicator when determining or revising a credit limit. It is used to identify risks early and determine follow-up actions. Changes in payment behavior can be grounds for additional assessment.
A customer who structurally pays 10 days after the due date shows anomalous payment behavior compared to the agreed upon deadline.
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